Asian Infrastructure Bank: How China Overtook Washington

The White House did not appreciate the fact that, last week, the United Kingdom decided to join the Asian Infrastructure Investment Bank (AIIB), initiated by China, “without consulting the United States.”* It clearly concerns a breach regarding the “special relationship” between the United Kingdom and the United States, which is trying to contain China’s rising international power. But since Monday night, three other great European countries – France, Germany and Italy – have each separately announced that they, too, will join the AIIB.

A Risk of Tarnishing the Trans-Atlantic Relationship

From this point forward, it’s a case that risks tarnishing the trans-Atlantic relationship, as long as it’s true that Washington has handled the AIIB case particularly poorly. This new institution of influence, launched last October by China and endowed with a fund of $50 billion, has been well-received by the majority of Asian countries, with the exception of the USA’s close allies, notably South Korea and Australia. Yet, these two, which were the target of intense American lobbying for six months, are in the process of reconsidering their position. Japan, for its part, is the main financial supporter of the Asian Development Bank and doesn’t plan on joining the new bank, which some already present as a rival to the World Bank, the International Monetary Fund and ADB.

A Successful Diplomatic Maneuver for Beijing

Beijing can only rejoice in having pulled off such a successful diplomatic maneuver. For many years, China has profited from competition between Western countries to obtain different benefits (loans, technology transfers, even tax benefits for investments), but this time, it has succeeded in isolating Washington, entangled in its internal political quarrels between the White House, the Treasury and Congress – the latter being dominated by the Republican Party, which seeks, before all else, to damage the Obama administration.

From the European side, David Cameron’s government pulled off a publicity coup in first announcing his accord with the AIIB, which will soon emerge in Shanghai.

London Determined To Handle Transactions Between China and the Rest of the World

It’s proof, if proof were needed, of London’s determination to become the main hub for financial transactions between China and the rest of the world. Several Chinese banks – among them the China Construction Bank – have also opened trading centers in Yuan, the Chinese currency, in the British capital. Likewise, the conservative prime minister – who faces a crucial election next May 7 – indicated several times that Chinese investors were welcome in the United Kingdom. “I have no problems with the fact that the Chinese are investing in nuclear energy, airports, even water infrastructure,”* he stated at the end of 2014. The Chinese sovereign fund has taken 10 percent of the capital of Thames Walter, the main British water treatment company; China has also taken 10 percent of the capital of Heathrow Airport, with China having signed in total more than 10 billion euros in investment promises to the United Kingdom last year, making the country the favorite destination for Chinese investors.

In a difficult economic context, the Europeans engage in a fierce rivalry in order to attract Chinese investors. François Hollande and Angela Merkel increased their attention to Beijing; Italy, Greece and Portugal make eyes at the investors … but David Cameron decided to stake everything on this, risking alienating his American ally and widening the gap a little more between the United Kingdom and continental Europe.

*Editor’s note: This quote, accurately translated, could not be verified.